Under-investment in post-trade has caused a lack of industry visibility into custodian expenses, survey finds
27 September 2021 UK
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The lack of firm-wide visibility into brokerage, custodian, exchange and clearing expenses is the result of under-investment in post-trade processes, a recent report by Meritsoft has concluded, after the group conducted an industry wide survey.
The report, entitled “A New Era for Trade Expense Management”, found global investment banks are spending vast sums each year on their brokerage fees and billing operations but data challenges, lack of automation and legacy technology make it difficult to fully understand and therefore optimise their spend across the organisation.
88 per cent of respondents who took part in the survey said trade expenses made up a substantial amount of their annual costs, with 80 per cent of respondents paying between US$250m and US$1bn in 2020.
Some 78 per cent cite a lack of a central data repository as a key reason that impacts operational processes, while 77 per cent outlined outdated rate agreements and counterparty referential data as another key issue influencing problems with operational processes.
Daniel Carpenter, commercial lead and head of regulation at Meritsoft, comments: “The challenges with trade expense management are well known in the industry. Despite awareness, many banks are yet to invest in solutions that bring greater visibility of their trade related costs.
“With bank operations becoming increasingly complex, through globalisation, consolidation and new asset class activity, this problem is in danger of spiralling out of control.
He adds: “Our findings provide a compelling business case for board members to invest in solutions that shine a light on this costly and opaque area of the trade lifecycle.”
A total of 451 senior members of the financial sector took part in Meritsoft’s survey.
Their job roles include heads of operations, COOs, CEOs, heads of trading or brokerage operations, heads of execution, and heads of desk at tier 1 and tier 2 banks.
Inter-dealer brokers in the USA, Canada, the UK, Germany, France, Italy, and Spain also responded to the survey.
The report, entitled “A New Era for Trade Expense Management”, found global investment banks are spending vast sums each year on their brokerage fees and billing operations but data challenges, lack of automation and legacy technology make it difficult to fully understand and therefore optimise their spend across the organisation.
88 per cent of respondents who took part in the survey said trade expenses made up a substantial amount of their annual costs, with 80 per cent of respondents paying between US$250m and US$1bn in 2020.
Some 78 per cent cite a lack of a central data repository as a key reason that impacts operational processes, while 77 per cent outlined outdated rate agreements and counterparty referential data as another key issue influencing problems with operational processes.
Daniel Carpenter, commercial lead and head of regulation at Meritsoft, comments: “The challenges with trade expense management are well known in the industry. Despite awareness, many banks are yet to invest in solutions that bring greater visibility of their trade related costs.
“With bank operations becoming increasingly complex, through globalisation, consolidation and new asset class activity, this problem is in danger of spiralling out of control.
He adds: “Our findings provide a compelling business case for board members to invest in solutions that shine a light on this costly and opaque area of the trade lifecycle.”
A total of 451 senior members of the financial sector took part in Meritsoft’s survey.
Their job roles include heads of operations, COOs, CEOs, heads of trading or brokerage operations, heads of execution, and heads of desk at tier 1 and tier 2 banks.
Inter-dealer brokers in the USA, Canada, the UK, Germany, France, Italy, and Spain also responded to the survey.
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